Question on pair trading.
Dear experts and fans of paired trading, please explain and justify mathematically what is the advantage of EURUSD buy entry and GBPUSD sell entry compared to a single entry of EURGBP cross. And is there any advantage at all? Personally, I have my doubts on this point. If there is no advantage, then using currency pairs that have one currency in common (in the above example is USD) does not make sense in pair trading?
- Euro Rat
- On the unequal probability of a price move up or down
- Writing an effective advisor
khorosh:
Dear experts and fans of paired trading, please explain and justify mathematically what is the advantage of EURUSD buy entry and GBPUSD sell entry over a single EURGBP crossover entry. And is there any advantage at all? - I personally have my doubts in this matter. If there is no advantage, it turns out that using currency pairs that have one currency in common (in the above example is USD) does not make sense in pair trading?
Co-integration. Pose decisions are made on a stationary series and EURGBP is not a stationary series.
Dear experts and fans of paired trading, please explain and justify mathematically what is the advantage of EURUSD buy entry and GBPUSD sell entry over a single EURGBP crossover entry. And is there any advantage at all? - I personally have my doubts in this matter. If there is no advantage, it turns out that using currency pairs that have one currency in common (in the above example is USD) does not make sense in pair trading?
faa1947:
In cointegration. Pose decisions are made on a stationary series and EURGBP is not a stationary series.
If you are sure about this can you show me on the formulas so that it is not unsubstantiated? Personally, I see on the charts that the start of cointegration coincides with the moment ofEURGBP reversal.
In cointegration. Pose decisions are made on a stationary series and EURGBP is not a stationary series.
khorosh:
Dear experts and fans of the paired trading, please explain and justify mathematically, what is the advantage of the buy EURUSD and sell GBPUSD pair entry from the single entry of EURGBP cross. And is there any advantage at all? - I personally have my doubts in this matter. If there is no advantage, then using currency pairs that have one currency in common (in the above example, it is USD) does not make sense in pair trading?
Dear experts and fans of the paired trading, please explain and justify mathematically, what is the advantage of the buy EURUSD and sell GBPUSD pair entry from the single entry of EURGBP cross. And is there any advantage at all? - I personally have my doubts in this matter. If there is no advantage, then using currency pairs that have one currency in common (in the above example, it is USD) does not make sense in pair trading?
In your example it makes no sense.
Makes sense for instruments but with crosses. For example any currency pair and gold
khorosh:
If you're sure about this, can you show it in the formulas so that it's not unsubstantiated? Personally, I see on the charts that the start of cointegration coincides with theEURGBP reversal.
It could coincide with anything. The residual from the cointegration equation is stationary. We are struggling for that. What happens toEURGBP is not very important. Maybe it can be used for additional information. I'm talking about stationarity. That is the value.
If you're sure about this, can you show it in the formulas so that it's not unsubstantiated? Personally, I see on the charts that the start of cointegration coincides with theEURGBP reversal.
faa1947:
It can coincide with anything. The residual from the cointegration equation is stationary. Fighting for it. What happens to EURGBP is not very important. Maybe it can be used for additional information. I'm talking about stationarity. That's the value.
It can coincide with anything. The residual from the cointegration equation is stationary. Fighting for it. What happens to EURGBP is not very important. Maybe it can be used for additional information. I'm talking about stationarity. That's the value.
There is no value. Show me an example where entering the market in two pairs is not equal to entering the market in a crossover
faa1947:
It can coincide with anything. The residual from the cointegration equation is stationary. We are fighting for it. What happens toEURGBP is not very important. Maybe it can be used for additional information. I'm talking about stationarity. That is the value.
In that case, explain how stationarity can help in determining the correct entry point in pair trading.
It can coincide with anything. The residual from the cointegration equation is stationary. We are fighting for it. What happens toEURGBP is not very important. Maybe it can be used for additional information. I'm talking about stationarity. That is the value.
Demi:
In your example - doesn't make sense.
Makes sense for instruments but with crosses. For example, any currency pair and gold
I agree. Here's an example - read the whole page.
khorosh:
In that case, explain how stationarity can help in determining the correct entry point in pair trading.
Entry by deviation from zero. stationarity says that it is bound to return to zero. This is a proven fact. Entering on a currency pair is one of the TA options, nothing is known about the future. Maybe you will make a profit for 10 years, maybe you will sell out tomorrow.
In that case, explain how stationarity can help in determining the correct entry point in pair trading.
Your pair trading is typical TA. That's how it works. You don't know the reasons why it worked, just like you don't know the reasons why it didn't work. Having enough experience you can build a profitable system, but it is impossible to answer the questions you asked.
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